Our performance in 2009 - Sappi

2009 annual report
9. Property, plant and equipment continued
Details of land and buildings are available at the registered offices of the respective companies who own the assets (refer to
note 24 for details of encumbrances).
Asset impairments
September 2009
Usutu Mill
Usutu Mill is an unbleached pulp mill and forms part of the Sappi Forest Products reporting segment. In 2008, forest fires
caused by severe weather conditions resulted in the loss of approximately 28% of the mill’s fibre supply and 40% of its
plantations, resulting in insufficient fibre for the mill to continue operating in the long term under its existing regime. An
impairment loss of US$37 million was recognised in 2008 and subsequent capital expenditure of US$5 million, incurred in
2009, has been impaired. The recoverable amount of the various assets has been determined on the basis of value in use.
The value in use was established using a pre-tax real discount rate of 10.92%.
Muskegon Mill
On 26 August 2009, Sappi announced that it would permanently cease operations at its coated fine paper mill in Muskegon,
Michigan, North America. The property, plant and equipment at the mill had already been fully impaired in prior years.
European mechanical coated cash-generating unit
The mechanical coated cash-generating unit forms part of the Fine Paper segment. Due to the downturn in the market, the
net present value of the future cash flows of the cash-generating unit was lower than its carrying amount. As a result, a noncash
impairment charge of US$74 million has been recognised. The recoverable amount of the various assets within the
cash-generating unit has been determined on the basis of value in use. The value in use was established using a pre-tax
real discount rate of 7.22%.
September 2008
Blackburn and Maastricht Mills
Maastricht and Blackburn Mills form part of Sappi Fine Paper Europe. Maastricht Mill produces coated fine and label paper
while Blackburn produces coated fine and board paper. Due to the ongoing increases in input costs and the overcapacity
in the European market, Blackburn Mill and Maastricht Paper Machine No 5 have been unable to produce acceptable
returns on investment, despite significant efforts to curb costs and improve profitability. Production at Blackburn Mill ceased
on 17 October 2008. No alternative to the closure of the mill was found during the employee representative consultation
process, which ended on 11 November 2008. In respect of Paper Machine No 5 at Maastricht Mill, consultations and social
plan negotiations with works council and unions were concluded in early October 2008. Production on Paper Machine
No 5 at Maastricht Mill ceased on 19 December 2008. A non-cash impairment charge of US$78 million was recognised as
a result of these closures.
127
financials